1.          This Standard should be applied in presenting profit or loss from ordinary activities and extraordinary items in the income statement and in accounting for changes in accounting estimates, fundamental errors and changes in accounting policies.

2.          This Standard supersedes International Accounting Standard IAS 8, Unusual and Prior Period Items and Changes in Accounting Policies, approved in 1977.

3.          This Standard deals with, among other things, the disclosure of certain items of net profit or loss for the period. These disclosures are made in addition to any other disclosures required by other International Accounting Standards, including International Accounting Standard IAS 5, Information to be disclosed in Financial Statements.

4.          This Standard also deals with certain disclosures relating to discontinued operations. It does not deals with the recognition and measurement issues related to discontinued operations.

5.          The tax effects of extraordinary items, fundamental errors and changes in accounting policies are accounted for and disclosed in accordance with International Accounting Standard IAS 12, Accounting for Taxes on Income. Where IAS 12 refers to unusual items, this should be read as extraordinary items as defined in this Standard.

8.          Normally, all items of income and expense recognised in a period are included in the determination of the net profit or loss for the period. This includes extraordinary items and the effects of changes in accounting estimates. However, circumstances may exist when certain items may be excluded from net profit or loss for the current period. This Standard deals with two such circumstances: the correction of fundamental errors and the effect of changes in accounting policies.

9.          Other International Accounting Standards deal with items which may meet the Framework definitions of income or expense but which are usually excluded from the determination of the net profit or loss. Examples include revaluation surpluses (see International Accounting Standard IAS 21, The Effect of Changes in Foreign Exchange Rates).

10.          The net profit or loss for the period comprises the following components, each of which should be disclosed on the face of the income statement:

12.          Virtually all items of income and expense included in the determination of profit or loss for the period arise in the course of the ordinary activities of the enterprise. Therefore, only on rare occasions does an event or transaction give rise to an extraordinary item.

13.          Whether an event or transaction is clearly distinct from the ordinary activities of the enterprise is determined by the nature of the event or transaction in relation to the business ordinarily carried on by the enterprise rather than by the frequency with which such events are expected to occur. Therefore, an event or transaction may be extraordinary for one enterprise but not extraordinary for another enterprise because of the differences between their respective ordinary activities. For example, losses sustained as a result of an earthquake may qualify as an extraordinary item for may enterprises. However, claims from policyholders arising from an earthquake do not qualify as an extraordinary item for an insurance enterprise that insures against such risks.

14.          Examples of events or transactions that generally give rise to extraordinary items for most enterprises are:

(a)          the expropriation of assets; or

(b)          an earthquake or other natural disaster.

15.          The disclosure of the nature and amount of each extraordinary item may be made on the face of the income statement, or when this disclosure is made in the notes to the financial statements, the total amount of all extraordinary items is disclosed on the face of the income statement.

Profit or Loss from Ordinary Activities

16.          When items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items should be disclosed separately.

17.          Although the items of income and expense described in paragraph 16 are not extraordinary items, the nature and amount of such items may be relevant to users of financial statements in understanding the financial position and performance of an enterprise and in making projections about financial position and performance. Disclosure of such information is usually made in the notes to the financial statements.

18.          Circumstances which may give rise to the separate disclosure of items of income and expense in accordance with paragraph 16 include:

Discontinued Operations

19.          While the disposal of investments or other major assets may be sufficiently important to warrant disclosure of the related items of income and expense, occasionally an enterprise sells or abandons a separate, major line of business which is distinguishable from other business activities, for example, a segment determined in accordance with International Accounting Standard IAS 14, Reporting Financial Information by Segment. When this constitiutes a discontinued operation as defined in this Standard, the disclosures contained in paragraph 20 are relevant to users of financial statements.

20.          The following disclosures should be made for each discontinued operation:

21.          The results of a discontinued operation are generally included in profit or loss from ordinary activities. However, in the rare circumstances that the discontinuance is the result of events or transactions that are clearly distinct from the ordinary activities of the enterprise and therefore are not expected to recur frequently or regularly, the income or expenses that arise from the discontinuance are treated as extraordinary items. For example, if a subsidiary is expropriated by a foreign government, the income or expense that arise from the expropriation may qualify as extraordinary item. The disclosure requirements in paragraph 20 are applied for all discontinues operations including those that give rise to extraordinary items.

22.          When it is known at the date on which the financial statements are authorised for issue that an operation was discontinued after the balance sheet date or that it will be discontinued, the disclosure requirements of paragraph 20 are applied to the extent that the information can be reliably estimated.

23.          As a result of the uncertainties inherent in business activities, many financial statement items cannot be measured with precision but can only be estimated. The estimation process involves judgements based on the latest information available. Estimates may be required, for example, of bad debts, inventory obsolescence or the useful lives or expected pattern of consumption of economic benefits of depreciable assets. The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability.

24.          As estimate may have to be revised if changes occur regarding the circumstances on which the estimate was based or as a result of new information, more experience or subsequent developments. By this nature, the revision of the estimate does not bring the adjustment within the definitions of an extraordinary item or a fundamental error.

25.          Sometimes it is difficult to distinguish between change in accounting policy and a change in an accounting estimate. In such cases, the change is treated as a change in an accounting estimate, with appropriate disclosure.

26.          The effect of a change in an accounting estimate should be included in the determination of net profit or loss in:

27.          A change in an accounting estimate may affect the current period only or both the current period and future periods. For example, a change in the estimate of the amount of bad debts affects only the current period and therefore is recognised immediately. However, a change in the estimated useful life or the expected pattern of consumption of economic benefits of a depreciable asset affects the depreciation expense in the current period and in each period during the remaining useful life of the asset. In both cases, the effect of the change relating to the current period is recognised as income or expense in the current period. The effect, if any, on future periods is recognised in future periods.

28.          The effect of a change in an accounting estimate should be included in the same income statement classification as was used previously for the estimate.

29.          To ensure the comparability of financial statements of different periods, the effect of a change in an accounting estimate for estimates which were previously included in the profit or loss from ordinary activities is included in that component of net profit or loss. The effect of a change in an accounting estimate for an estimate which was previously included as an extraordinary item is reported as an extraordinary item.

30.          The nature and amount of a change in an accounting estimate that has a material effect in the current period or which is expected to have a material effect in subsequent periods should be disclosed. If it is impracticable to quantify the amount, this fact should be disclosed.

Fundamental Errors

31.          Errors in the preparation of the financial statements of one or more prior periods may be discovered in the current period. Errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts, fraud or oversights. The correction of the errors is normally included in the determination of net profit or loss for the current period.

32.          On rare occasions, an error has such a significant effect on the financial statements of one or more prior periods that those financial statements can no longer be considered to have been reliable at the date of their issue. These errors are referred to as fundamental errors. An example of a fundamental error is the inclusion in the financial statements of a previous period of material amounts of work in progress and receivables in respect of fraudulent contracts which cannot be enforced. The correction of fundamental errors that relate to prior periods requires the restatement of the comparative information or the presentation of additional pro forma information.

33.          The correction of fundamental errors can be distinguished from changes in accounting estimates. Accounting estimates by their nature are approximations that my need revision as additional information becomes known. For example, the gain or loss recognised on the outcome of a contingency which previously could not be estimated reliably does not constitute the correction of a fundamental error.

Benchmark treatment

34.          The amount of the correction of a fundamental error that relates to prior periods should be reported by adjusting the opening balance of retained earnings. Comparative information should be restated, unless it is impracticable to do so.

35.          The financial statements, including the comparative information for prior periods, are presented as if the fundamental error had been corrected in the period in which it was made. Therefore, the amount of the correction that relates to each period presented is included within the net profit or loss for that period. The amount of the correction relating periods prior to those included in the comparative information in the financial statements is adjusted against the opening balance of retained earnings in the earliest period presented. Any other information reported with respected to prior periods, such as historical summaries of financial data, is also restated.

36.          The restatement of comparative information does not necessarily give rise to the amendment of financial statements which have been approved by shareholders or registered or filed with regulatory authorities. However, national laws may require the amendment of such financial statements.

37.          An enterprise should disclose the following:

38.          The amount of the correction of a fundamental error should be included in the determination of net profit or loss for the current period. Comparative information should be presented as reported in the financial statements of the prior period. Additional pro forma information, prepared in accordance with paragraph 34, should be presented unless it is impracticable to do so.

39.          The correction of the fundamental error is included in the determination of the net profit or loss for the current period. However, additional information is presented, often as separate columns, to show the net profit or loss of the current period and any prior periods presented as if the fundamental error had been corrected in the period when it was made. It may be necessary to apply this accounting treatment in countries where the financial statements are required to include comparative information which agrees with the financial statements in prior periods.

40.          An enterprise should disclose the following:

Changes in Accounting Policies

41.          Users need to be able to compare the financial statements of an enterprise over a period of time to identify trends in its financial position, performance and cash flows. Therefore, the same accounting policies are normally adopted in each period.

42.          A change in accounting policy should be made only if required by statute, or by an accounting standard setting body, or if the change will result in a more appropriate presentation of events or transactions in the financial statements of the enterprise.

43.          A more appropriate presentation of events or transactions in the financial statements occurs when the new accounting policy results in a more relevant or reliable information about the financial position, performance or cash flows of the enterprise.

44.          The following are not changes in accounting policies:

45.          A change in accounting policy is applied retrospectively or prospectively in accordance with the requirements of this Standard. Retrospective application results in the new accounting policy being applied to events or transactions as if the new accounting policy has always been in use. Therefore, the accounting policy is applied to events and transactions from the date of origin of such items. Prospective application means that the new accounting policy is applied to the events and transactions occurring after the date of the change. No adjustments relating to prior periods are made either to the opening balance of retained earnings or in reporting the net profit or loss for the current period because existing balances are not recalculated. However, the new accounting policy is applied to existing balances as from the date of change. For example, an enterprise may decide to change its accounting policy for borrowing costs and capitalise those costs in conformity with the allowed alternative treatment in International Accounting Standard IAS 23, Borrowing Costs. Under prospective application, the new policy only applies to borrowing costs that are incurred after the date of the change in accounting policy.

Adoption of an International Accounting Standard

46.          A change in accounting policy which is made on the adoption of an International Accounting Standard should be accounted for in accordance with the specific transitional provisions, if any, in that International Accounting Standard. In the absence of any transitional provisions, the change in accounting policy should be applied in accordance with the benchmark treatment in paragraphs 49, 52 and 53 or the allowed alternative treatments in paragraphs 54, 56 and 57.

47.          The transitional provisions in an International Accounting Standard may require either a retrospective or a prospective application of a change in accounting policy.

48.          When an enterprise has not adopted a new International Accounting Standard which has been published by the International Accounting Standards Committee but which has not yet come to effect, the enterprise is encouraged to disclose the nature of the future change in accounting policy and an estimate of the effect of the change on its net profit or loss and financial position.

Other Changes in Accounting Policies - Benchmark Treatment

49.          A change in accounting policy should be applied retrospectively unless the amount of any resulting adjustment that relates to prior periods is not reasonably determinable. Any resulting adjustment should be reported as an adjustment to the opening balance of retained earnings. Comparative information should be restated unless it is impracticable to do so.

50.          The financial statements, including the comparative information for prior periods, are presented as if the new accounting policy had always been in use. Therefore, comparative information is restated in order to reflect the new accounting policy. The amount of the adjustment relating to periods prior to those included in the financial statements is adjusted against the opening balance of retained earnings of the earliest period presented. Any other information with respect to prior periods, such as historical summaries of financial data, is also restated.

51.          The restatement of comparative information does not necessarily give rise to the amendment of financial statements which have been approved by shareholders or registered or filed with regulatory authorities. However, national laws may require the amendment of such financial statements.

52.          The change in accounting policy should be applied retrospectively when the amount of the adjustment to the opening balance of retained earnings required by paragraph 49 cannot be reasonably determined.

54.          A change in accounting policy should be applied retrospectively unless the amount of any resulting adjustment that relates to prior periods is not reasonably determinable. Any resulting adjustment should be included in the determination of the net profit or loss for the current period. Comparative information should be presented as reported in the financial statements of the prior period. Additional pro forma comparative information, prepared in accordance with paragraph 49, should be presented unless it is impracticable to do so.

55.          Adjustments resulting from a change in accounting policy are included in the determination of the net profit or loss for the period. However, additional comparative information is presented, often as separate columns, in order to show the net profit or loss and the financial position of the current period and any prior periods presented as if the new accounting policy had always been applied. It may be necessary to apply this accounting treatment in countries where the financial statements are required to include comparative information which agrees with the financial statements presented in prior periods.

56.          The change in accounting policy should be applied prospectively when the amount to be included in net profit or loss for the current period required by paragraph 54 cannot be reasonably determined.

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